WHAT IS SURVIVORSHIP BIAS AND WHY YOU SHOULD VISIT CEMETERIES
No matter where Rick looks, he sees rock stars. They appear on television, on the front pages of magazines, in concert programmes and at online fan sites. Their songs are unavoidable – in the mall, on his playlist, in the gym. The rock stars are everywhere. There are lots of them. And they are successful. Motivated by the stories of countless guitar heroes, Rick starts a band. Will he make it big? The probability lies a fraction above zero. Like so many others, he will most likely end up in the graveyard of failed musicians. This burial ground houses 10,000 times more musicians than the stage does, but no journalist is interested in failures – with the exception of fallen superstars. This makes the cemetery invisible to outsiders.
In daily life, because triumph is made more visible than failure, you systematically overestimate your chances of succeeding. As an outsider, you (like Rick) succumb to an illusion, and you mistake how minuscule the probability of success really is. Rick, like so many others, is a victim of Survivorship Bias.
Behind every popular author, you can find 100 other writers whose books will never sell. Behind them are another 100 who haven’t found publishers. Behind them are yet another 100 whose unfinished manuscripts gather dust in drawers. And behind each one of these are 100 people who dream of – one day – writing a book. You, however, hear of only the successful authors (these days, many of them self-published) and fail to recognise how unlikely literary success is. The same goes for photographers, entrepreneurs, artists, athletes, architects, Nobel Prize winners, television presenters and beauty queens. The media is not interested in digging around in the graveyards of the unsuccessful. Nor is this its job. To elude the survivorship bias, you must do the digging yourself.
You will also come across survivorship bias when dealing with money and risk: imagine that a friend founds a start-up. You belong to the circle of potential investors and you sense a real opportunity: this could be the next Google. Maybe you’ll be lucky. But what is the reality? The most likely scenario is that the company will not even make it off the starting line. The second most likely outcome is that it will go bankrupt within three years. Of the companies that survive these first three years, most never grow to more than ten employees. So, should you never put your hard-earned money at risk? Not necessarily. But you should recognise that the survivorship bias is at work, distorting the probability of success like cut glass.
Take the Dow Jones Industrial Average Index. It consists of out-and-out survivors. Failed and small businesses do not enter the stock market, and yet these represent the majority of business ventures. A stock index is not indicative of a country’s economy. Similarly, the press does not report proportionately on all musicians. The vast number of books and coaches dealing with success should also make you sceptical: the unsuccessful don’t write books or give lectures on their failures.
Survivorship bias can become especially pernicious when you become a member of the ‘winning’ team. Even if your success stems from pure coincidence, you’ll discover similarities with other winners and be tempted to mark these as ‘success factors’. However, if you ever visit the graveyard of failed individuals and companies, you will realise that its tenants possessed many of the same traits that characterise your success.
If enough scientists examine a particular phenomenon, a few of these studies will deliver statistically significant results through pure coincidence – for example, the relationship between red wine consumption and high life expectancy. Such (false) studies immediately attain a high degree of popularity and attention. As a result, you will not read about the studies with the ‘boring’, but correct results.
Survivorship bias means this: people systematically overestimate their chances of success. Guard against it by frequently visiting the graves of once-promising projects, investments and careers. It is a sad walk, but one that should clear your mind.
38.) Halo Effect – EVERYONE IS BEAUTIFUL AT THE TOP
20.) Outcome Bias – NEVER JUDGE A DECISION BY ITS OUTCOME
47.) Alternative Blindness – DO NOT MARVEL AT YOUR EXISTENCE
36.) Fundamental Attribution Error – NEVER ASK A WRITER IF THE NOVEL IS AUTOBIOGRAPHICAL
The above article is from the book The Art of Thinking Clearly by Rolf Dobelli. The article is only for educational and informative purposes to explain and understand cognitive biases. It is a great book, definitely worth a read!